Inflation has a long way to go, says RBI deputy governor H R Khan

The Reserve Bank of India (RBI) believes there is still time for inflation to ease...

RBI believes there is still time for inflation to ease as input costs remain high. (Reuters)

The Reserve Bank of India (RBI) believes there is still time for inflation to ease as input costs remain high and food inflation is structural.

“Inflation has a long way to go,” said RBI deputy governor H R Khan at a speech in an event here today adding that markets have perhaps become complacent.

India’s retail inflation has eased to 6.46% in September led by a drop in food as well as fuel inflation. The RBI has stated that it aims to bring down inflation to 8% by January 2015 and to 6% by January 2016.

The RBI will release its bi-monthly policy on December 2. On the back of the recent sharp fall in retail inflation along with a drop in global crude oil prices, expectations of a rate cut have gained momentum in markets off late. Bond yields have fallen to a 15-month low on such expectations. The 10-year 8.40%, 2024 benchmark bond is trading around 8.20% today.

Khan said that the fall in global crude oil prices was a “boon” for India. Brent crude has fallen nearly $20 per barrel over the last two months. The soft oil prices along with a stable currency augurs well for domestic inflation as well as the currenct account deficit position of the country.